Fed Researcher Says Long-Term Unemployment in U.S. Has Declined

By Aki Ito -
Feb 4, 2013

Long-term unemployment has begun to
wane as the U.S. job market recovers and will probably continue
to fall, the Federal Reserve Bank of San Francisco found.

“While unemployment duration remains near historical
highs, the characteristics of the long-term unemployed and their
recent job-finding rates suggest that a sustained cyclical
recovery will largely eliminate long-term joblessness,”
according to paper released today by the San Francisco Fed.
“The incidence of long-term unemployment has declined over the
past few years.”

Fed officials have been closely following the ranks of
those who have been out of work for more than six months,
concerned that such workers face declining job prospects the
longer they stay unemployed. The central bank has been buying
$85 billion per month in bonds to accelerate a rebounding labor
market that Chairman Ben S. Bernanke says is not improving fast
enough.

“Very extended periods of unemployment can interfere with
the workings at the labor market,” Bernanke said in a press
conference Dec. 12 after he and his colleagues voted to expand a
third round of quantitative easing. “If the Fed were not to
address a large unemployment problem for a long time, it might,
in fact, have some influence in the long-term unemployment
rate.”

Long Term

The San Francisco Fed paper reviews the percentage of
people who are long-term unemployed instead of the average
amount of time people remain unemployed, which is a more
commonly used gauge of long-term joblessness.

While unemployment duration -- at 35.3 weeks in January --
has remained “very high,” the ratio of those who have been
jobless for more than six months has “fallen significantly
since early 2010,” according to Rob Valletta, a research
adviser at the San Francisco Fed who wrote the paper.

Valletta also compared the rates at which these workers
found work in the current recovery to those in the past, finding
few differences.

“That finding implies that the current elevated level of
long-term unemployment is likely to disappear over time,” he
said.